• Home
  • About
  • Newsletters
  • Conference
  • TMS Links
  • Calendar
  • Log In
  • Register

Room 151

  • 151 BRIEF

    What's New?

  • Legal & General invests £100m in Sunderland regeneration project

    November 28, 2019

  • Somerset council invests in Devon industrial site

    November 28, 2019

  • Appeal Court backs Birmingham’s £19m sprinkler spending

    November 28, 2019

  • Border to Coast launches private credit offering

    November 28, 2019

  • Darlington estimates 17% annual return on proposed housing company

    November 28, 2019

  • Knowsley buys town centre land to kickstart regeneration

    November 28, 2019

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Jobs

Croydon’s Brick by Brick to borrow more council money

0
  • by Colin Marrs
  • in 151 News · Development
  • — 20 Feb, 2019

London Borough of Croydon’s standalone housing company has pushed back the date by which it will become self-financing after announcing plans to borrow more cash to develop new sites.

In last year’s business plan, the Brick by Brick company had anticipated that it would cease to require funding from the council from 2019/20.

However, the equivalent document for this year, which will be presented to the council’s cabinet next week, shows that the company will seek an extra £78m from the council.

A statement from Brick by Brick to Room151 said: “The fundamental reason for this is the addition of a new pipeline of sites into the 2019/20 business plan (an additional £206m).

“Essentially the extension of the programme requires more borrowing as it is substantially more investment.”

The extra funding will be made up of £58.5m in borrowing from the council at a commercial rate of interest, plus £19.5m of equity investment.

The council currently has a draft budget of £30m in 2019/20 to cover Brick by Brick funding.

The remainder will be covered by slippage from the 2018/19 budget of £175m, for which a budget adjustment of £100m was reported to cabinet in the second quarter.

A report to the cabinet said: “After 2021/22, BXB anticipates that it will become self-financing, with revenue from sales of housing sufficient to cover all known ongoing development expenditure.”

Photo (cropped): Elmira College, Flickr

In addition, profits from this date will be used to pay down debt to the council, which is the company’s sole shareholder.

However, the statement from the company said: “The Brick by Brick business model will always require additional borrowing to support additional units for development – unless the programme reduced dramatically in terms of ambition – because all debt, interest and profit on schemes is returned to the council as the individual schemes complete.”

Brick by Brick has been trading since 2016 and now has a pipeline list of around 250 sites with capacity for over 4,000 homes.

To date the company has achieved planning consent on 39 sites which will deliver more than 1,250 homes.

The company said a further seven schemes have been  submitted to the planning authority or are being prepared for planning.

However, its business plan warned it could be affected by a slowdown in the housing market caused by Brexit.

It said that although there is a “general expectation that the property market will pick up post-Brexit once the precise terms of a deal have become clearer”, it is taking a “more prudent position” in terms of its predictions for Croydon house prices.

It said: “The evidence…which has been used to value the company’s first units to launch for sale, indicates that the local market is likely to continue to stagnate.”

However, it said that a number of mitigating factors would help sustain the durability of the company’s business model.

Firstly, it said that most of the existing development programme is already in contract or has received tenders, removing much of the exposure to construction price inflation. 

It added that all Brick by Brick viability appraisals always use current prices with no expectation of price rises built in.

In addition, grants from the Greater London Authority to support the delivery of affordable housing could provide support to the programme.

Lastly, due to the company’s relationship with council-owned charitable trust Croydon Affordable Homes, “unlike many other developers, Brick by Brick has considerable potential to use tenure as a means of addressing any potential reduction in property values”.

This could include varying the proportions of private, shared ownership and affordable rent properties in schemes, or introducing new temporary tenures to address drops in property prices, the business plan said.

Get the Room 151 Newsletter

Share

You may also like...

  • LCIV launches fixed income fund with four councils on board 5 Jun, 2018
  • Call for needs-based solution as districts ‘punished’ by negative RSG proposals 25 Jul, 2018
  • Reversal of social rents policy puts housing development back on the agenda 5 Oct, 2017
  • News roundup: Warrington’s £200m business park acquisition, Birmingham’s council leader resigns, fire safety funding in the wake of Grenfell 14 Sep, 2017

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room 151 23 hours ago

    Court ruling leaves councils facing compensation bills for water overcharging: Councils could face compensation costs running into the millions after the High Court ruled that a council unlawfully overcharged its tenants for supplying water from 2002,… dlvr.it/RKZnQK pic.twitter.com/tawdmA9wlE

    Room 151 23 hours ago

    Election 2019: “Stark” differences in parties’ proposals for council funding: Conservative Party manifesto proposals would not meet rising costs faced by councils, while Labour Party policies would meet demand even with a council tax freeze, according to… dlvr.it/RKZnNT pic.twitter.com/F16kSfQrXI

    Room 151 2 days ago

    LGPS women discuss: climate & pension fund investing: Climate change has become one of the biggest issues for asset owners and managers as they move to tackle global warming. Room151 convened a roundtable of LGPS practitioners and advisers[...] dlvr.it/RKXsWW pic.twitter.com/3rtUTapwkF

    Room 151 3 days ago

    Interview: Doug Heron, CEO, Lothian Pension Fund: Doug Heron is heading towards marking one year at Lothian after making the switch from the world of fintech platforms to local government pensions. He talks to Room151 about core[...] dlvr.it/RKSQPK pic.twitter.com/ltHR6AS5gD

    Room 151 6 days ago

    LGPS and the climate change revolution: The pressure to integrate climate change thinking into LGPS asset management is growing. At the Room 151 LGPS Asset Allocation Forum, experts insisted climate be seen as a strategic issue[...] dlvr.it/RKK1cY pic.twitter.com/G87J33R4yS

    Room 151 6 days ago

    Conference chairs, ‘tree-hugging’ and overcharging pension investors: I have a story about two LGPS conferences, two conference chairs and an industry that appears to be changing for the better. I know, sounds like a real doozy, but[...] dlvr.it/RKK1Xy pic.twitter.com/6zYQFuuwAr

    Room 151 6 days ago

    Council feels financial squeeze on housing company pledge: The London Borough of Newham is set to approve a £113.1m funding package to support the latest phase of homes being developed by its wholly-owned housing company- but has admitted[...] dlvr.it/RKHwWy pic.twitter.com/jFrVeCWSw6

    Room 151 7 days ago

    Lack of benefits prompts shared services rethink: A major local authority shared services venture involving Northamptonshire County Council is to be restructured after it was revealed that a number of service areas were only included to boost[...] dlvr.it/RKDypl pic.twitter.com/f0R37mvCtP

    Room 151 7 days ago

    Council report casts doubt on emergence of competitive PWLB alternatives: A report by London Borough of Haringey finance officers has sounded the alarm over the options for councils to find cheaper lenders than the Public Works Loans Board (PWLB)… dlvr.it/RKDJxX pic.twitter.com/dRium0oigT

    Room 151 1 week ago

    How do the main party manifestos affect local government finance?: As the battle for Number 10 hots up, Room151 takes a look at the manifesto commitments likely to be of most interest to section 151 officers. Conservative Party Business rates[...] dlvr.it/RK7wr0 pic.twitter.com/qSNyBwrDrj

    Room 151 2 weeks ago

    Council service spending grows by 1.9%: English local authorities’ total service expenditure reached £91.4bn in 2018-19, a 1.9% increase on the previous year and its highest level since 2014-15. The figures were included in the Local[...] dlvr.it/RJmCCt

    Room 151 2 weeks ago

    LGPS governance review sets out s151 training steps: The latest phase of an ongoing Local Government Pension Scheme governance review has detailed its plans for making sure section 151 officers are properly schooled in their fund-related duties. One[...] dlvr.it/RJmC8C pic.twitter.com/JPI1aHfYbj

    Room 151 2 weeks ago

    Sector finance chief calls for council freedoms to swap PWLB loans: A leading local government finance figure says the government should have allowed councils to swap their Public Works Loan Board loans as an alternative to raising the interest rate.… dlvr.it/RJjG7z pic.twitter.com/cEJpbNjAAT

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Warrington outlines robust defence of out-of-borough investments
  • Next story Ashford to build and run solar farm to raise revenue

© Copyright 2019 Room 151. Typegrid Theme by WPBandit.